– Provides fundamental weighting to low volatility securities
– Indices cover Global, Developed, and Emerging markets
– Over $59 billion now tracking FTSE RAFI benchmarks
FTSE Group (“FTSE”), the global index provider, and Research Affiliates LLC, have announced the launch of the FTSE RAFI Low Volatility Index Series, a new set of global benchmarks that measure the performance of a basket of low volatility stocks weighted using fundamental factors, as opposed to market capitalisation.
The FTSE RAFI Low Volatility Index Series uses a straightforward, rules-based methodology that selects low volatility stocks while ensuring investability, low turnover and large capacity. Designed to provide a core-like equity exposure with lower volatility, the index series methodology employs a filter to avoid expensive low volatility stocks and is highly diversified across industry sectors and countries.
The indices can be used as performance benchmarks, or in the creation of financial products. Published in real-time, the new index series covers Global, Developed and Emerging markets and can be segmented on a regional or single country basis.
The FTSE RAFI Low Volatility Index Series builds on the success of the FTSE RAFI Index Series, which was launched in 2005. With one of the longest live track records of any alternatively weighted index series, FTSE RAFI indices have been widely adopted as the underlying benchmark for a wide variety of investment products including ETFs, managed accounts and mutual funds. As of 31 August, 2014, there were US$59 billion of assets benchmarked against FTSE RAFI indices, via mutual funds, ETFs, separately managed accounts and commingled funds.
Kevin Bourne, Managing Director, FTSE Group commented: “The launch of the FTSE RAFI Low Volatility Index Series is yet another example of the innovative and ground breaking products resulting from this successful partnership. FTSE and Research Affiliates continue to be seen as pioneers in the world of alternatively weighted indices, and this new suite of products aims to satisfy market demand for an index that captures low volatility stocks using fundamental factors.”
Jason Hsu, Co-Founder and Vice Chairman, Research Affiliates said: “The low volatility anomaly is a significant and persistent phenomenon which offers investors the opportunity to re-profile risk-adjusted returns of their equity core. However, existing quant-active approaches and smart beta approaches have shortcomings and do not fully deliver on the category’s potential. The FTSE RAFI Low Volatility methodology represents a next generation approach that produces a low volatility core universe which is valuation-aware, without uncomfortable country or sector active bets and with high liquidity and investment capacity.”
In common with all FTSE indices, the index series is managed according to a publicly available set of rules and overseen by an independent committee of market practitioners.
